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Maharashtra State Board · HSC Commerce · Class 12 (Std XII)

Class 12 Economics Chapter 5: Forms of Market

Short notes, key concepts, quick revision and practice MCQs with answers

This chapter explains what a market means in economics and classifies markets by place, time and competition. It then studies perfect competition, price determination, monopoly, oligopoly and monopolistic competition.

Key concepts: Forms of Market

Market
An arrangement through which buyers and sellers come in direct or indirect contact and exchange goods and services.
Classification of markets
By place (local, national, international), by time (very short, short, long, very long period) and by competition (perfect and imperfect).
Perfect competition
An ideal market with very many buyers and sellers, identical products, free entry and exit, one price and perfect knowledge. Sellers are price takers.
Equilibrium price
The price where demand and supply curves intersect, so quantity demanded equals quantity supplied. Marshall compared demand and supply to the two blades of scissors.
Monopoly
A market with a single seller who controls the whole supply of a product with no close substitute. The monopolist is a price maker and can discriminate in price.
Oligopoly
A market with a few sellers of a similar or differentiated product. Firms are interdependent and rely heavily on advertising.
Monopolistic competition
Competition among many sellers of close but not perfect substitutes. Product differentiation and selling cost are its key features.

Quick revision: important points

Practice MCQs with answers

  1. In economics, the term market refers to

    1. only a place where goods are sold and bought
    2. any shop selling goods
    3. an arrangement through which buyers and sellers come in contact directly or indirectly
    4. a place where only sellers meet
    Show answer

    Answer: C. an arrangement through which buyers and sellers come in contact directly or indirectly
    Economists see a market as a network of dealings between buyers and sellers, not just a physical place.

  2. Which set of things must exist for a market to exist?

    1. Only buyers and sellers
    2. Buyers and sellers, a product, a price, close contact and knowledge about the market
    3. Only a product and a shop
    4. A government office and a product
    Show answer

    Answer: B. Buyers and sellers, a product, a price, close contact and knowledge about the market
    A market needs buyers and sellers, a product or service, its price, close contact between the parties and market knowledge.

  3. A worldwide market in which buyers and sellers trade across national borders is called a(n)

    1. international market
    2. local market
    3. national market
    4. very long period market
    Show answer

    Answer: A. international market
    Classified by place, the international market covers trade in goods and services across countries.

  4. Which time-based market is one in which supply is fixed and price is decided by demand?

    1. Long period
    2. Short period
    3. Very long period
    4. Very short period
    Show answer

    Answer: D. Very short period
    In the very short period (a few days or weeks) supply cannot be increased, so demand determines the price.

  5. A period of more than five years in which all inputs are variable is called

    1. very short period
    2. very long period
    3. short period
    4. local period
    Show answer

    Answer: B. very long period
    The very long period exceeds five years; the long period is for a few years up to five, in which all costs can be adjusted.

All Class 12 Economics chapters

Class 12 Economics notes: all chapters